Elgi Equipments chalks ambitious growth path

The limping national flag atop many a flag mast including the one in Delhi’s Connaught Place or the Wagah border will be a thing of the past, if researchers at Coimbatore-based air compressor maker Elgi Equipments crack air flow patterns and make a capsule like fitment to the mast so that the tri color swings freely.

The good news is, the initial tests on the capsule appear successful.

“We are close to achieving it. On test is a white 45 x 30 feet cloth flag in our factory premises in Coimbatore. If the trials are successful, we will make the small air compressor capsules as fitments to the flag mast (about 110 feet high) and ensure the Indian flag is always flying high,’ said Jairam Varadaraj, MD of Elgi Equipments. Elgi is a 57-year-old company which makes air compressors and automotive components. The company, on Wednesday, announced a new brand identity, besides an audacious plan to become the second largest compressor company in the world in 10 years from the current seventh position—a feat that can be achieved only if it grows at a CAGR of 28% for the next 10 years. It has grown at 14.3% CAGR over the past eight years.

“We know it is not easy. It is not going to come organically either. A big part of that plan is through inorganic route,” Varadaraj said. The company is backing this plan by identifying target companies, mostly distributors in EU and the US—the dominant air compressor markets with a combined global share of 60%. “We have identified 25 companies/distributors in these two markets. It is a funnel approach. We will pick some and proceed,” he said. The project, codenamed CK2 or Capture K2,(the second tallest peak in the world), will see the Coimbatore-based manufacturer commit an investment of nearly Rs 5,000 crore during this period. Of this nearly Rs 1,000 to 1,200 crore will be invested in three years. “There is enough head room for fund raising,” he said. The company has a debt equity ratio of 0.2%. “We will not borrow indiscriminately. At best, the ratio will increase to 1% and not beyond,” he said.

“Our near term target is to achieve $1 billion in five years,” he said. The company closed last fiscal with revenues of nearly $230 million. “We are not on a linear growth path, instead headed for hockey stick growth,” he said. If business pans out as planned, the company will have an assembly plant for compressors in the EU/US in two years from now.